Would you cash in your pension, if you were in my position

[77Fee]

I have short term cash flow issues - getting divorced!

I have one DC pension pot worth £9,000. I think this is considered small enough that i could cash in its entirety. I am over 55. Would it be foolish to do that? My inclination is it would be as the growth there has been good the last few years.

Or should I just apply for a bank loan?

I reckon I need about £8,000 to keep afloat.

I'm a bit panicked right now as I rent and need to be able to stay here to work here. I work full time.

that pension equates to about £6.49 a year op

I would consider it in that situation - the pension is not going to be large enough to provide an actual income, and given it’s a small pot it won’t restrict future contributions.

You won’t get £8000 though, if it’s worth £9000, as only 25% is tax free so you’d need to pay tax on the rest.

Ah, thanks both for the quick response. I knew about the 25% tax free but, you're right, that doesn't give me £8,000 but enough for now.

I am not relying on that one to give me an income in retirement but it was, I hoped, going to be a nice cash sum at a future date. I guess I could leave some in, only extract what I really need, so the pot can grow a little.

op it’s worth peanuts, honestly peanuts. In fact i would hazard a guess hardly able to cover the cost of a packet of peanuts every month.

cash it in

Are you planning to make pension contributions in the future? If so, be aware that if you partly access your pension it will reduce the tax-relievable amount you can put in each year. This may or may not matter to you.

Taking all of the fund under the “small pots” rule won’t reduce the amount.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/money-purchase-annual-allowance-mpaa

Have you checked what penalties there are for withdrawing

No. I haven't. I think this is one I have online access to so I'll check that out.

So frustrating that my ex with his (literally) tens of thousands in the bank won't have this concern.

I will eventually get a % of his pension hence why I don't really need this DC pension for my retirement.

Thanks all.

Are you taking into account the compounding interest?

Op are you a higher rate taxpayer? I am not sure if you might have to pay tax on this. You need to check

You could do what I've done and put it into a drawdown pension after taking your 25% cash free (depending if you need the whole lot now or just as a back up fund, and what your working situation is)

That's complete rubbish. A DC fund of £9,000 would be something like a pension of £300 per year! Which - of course - is still not a lot, so it could be cashed in as a "small pot" (less tax on 75% of it) or put into drawdown. But as others have said watch out for the impact that might have on you contributing to future pensions if that matters.

Depending on your earnings, will the approx £7k taxable push you over the 40% tax limit?
You’ll either pay around £1400 tax at 20%or double that if it takes you over.

And yes, arrange to take it is a ‘small pot’ to keep from breaching the MPAA if you are ever likely to want to put in over £10k a year.

Thanks @BorgQueen I think I'll run it past my (divorce) lawyer too as it is a matrimonial asset, albeit dwarfed by others.

I'm not close to the higher rate limit, unfortunately, but will bear that in mind.

Cash it in.

Will pension be considered as part of divorce settlement?

@Mum2Fergus , yes both our pensions are in the pot but, practically speaking, because his outweigh mine materially, it will be me who gets a share of his rather than vice versa.

I'm going to sit on my decision a while. Max out my credit card and overdraft first, as they are easy to manage.

Thanks, all.

I wouldn't cash it in! You've no guarantee of how much of your exh pension pot you might get in your divorce so you could be reliant on just a state pension and that's no place to be as I know from experience., any extra you have could be a much needed bonus in retirement.